Threatened by the competition, Uber Brazil changes its business model

. Jul 03, 2018
uber brazil business model Uber Brazil is facing fierce competition
uber brazil business model

Uber Brazil is facing fierce competition

In January 2017, soon after announcing a USD 100 million investment from China’s Didi Chuxing, ridesharing app 99 set up a stand on one of the corners of Antarctica Avenue, in São Paulo’s western zone. The idea was to approach drivers that arrived at a nearby building, where Uber Brazil has its headquarters, and lure them into joining 99 as well.

That episode exemplifies how the “blue ocean” Uber found in Brazil in 2014 – that is, an uncontested market space – has turned red. The competition exists, it has deep, deep pockets, and has become as aggressive as Uber itself.

</span></p> <p><span style="font-weight: 400;">Uber Brazil began its operations just before the </span><a href=""><span style="font-weight: 400;">2014 World Cup</span></a><span style="font-weight: 400;"> and experienced spectacular growth. While other competitors, such as Easy and even 99, used to focus their services on regular cabs, Uber revolutionized the market by using private cars. And when the economic crisis hit the country hard, thousands of unemployed people became Uber drivers. </span></p> <p><span style="font-weight: 400;">At one point, the Silicon Valley company had an 80 percent market share in Brazil. Today, Brazil is Uber&#8217;s second-biggest market, behind only the U.S. According to the company, São Paulo is the city with the most Uber rides in the world, and 15 million people use its services in Latin America&#8217;s largest economy.</span></p> <h3>Uber&#8217;s woes in Brazil</h3> <p><span style="font-weight: 400;">But while Uber Brazil has been a highly successful operation, it has hit its bumps along the way. Since 2016, drivers have held (small) protests </span><a href=""><span style="font-weight: 400;">across</span></a><span style="font-weight: 400;"> the country against what they call &#8220;abusive fees&#8221; charged by the app. Drivers were &#8220;taxed&#8221; between 20 and 25 percent of the ride&#8217;s value. &#8220;These charges make it impossible for us to pay for a new car or maintain our current vehicles,&#8221; said Miriam, a 47-year-old driver from Brasília.</span></p> <p><span style="font-weight: 400;">Apparently, after years of unheard complaints, 500,000 drivers have finally gotten Uber Brazil to lower their share of the rides. As a matter of fact, the entire pricing system is being altered.</span></p> <p><span style="font-weight: 400;">Instead of charging customers based on an estimate given before the ride, the prices will be calculated based on the distance and time of a ride &#8211; like a cab. And the amount that goes to the tech company will also depend on the ride, and no longer be fixed at 25 percent.</span></p> <p><span style="font-weight: 400;">According to Uber Brazil CEO Guilherme Telles, that is &#8220;part of a larger set of initiatives to enhance the gains of those who choose to drive with our app, like the option to give a tip for a good service.&#8221;</span></p> <p><span style="font-weight: 400;">Uber has been no stranger to controversy and problems. In Brazil, they have had several. At one point, hundreds of drivers sued the company, asking to be considered formal employees – with all the rights and benefits associated with actual employment relationships. While Brazilian courts have sided with Uber, it created a crisis for the company to manage.</span></p> <p><span style="font-weight: 400;">But Uber&#8217;s tempestuous relationship with drivers is by no means the company&#8217;s only problem in Brazil. As in several countries, the company has failed to quickly answer to allegations of sexual misconduct by drivers. Meanwhile, 99 launched a service of female drivers for women, and Cabify, a Spanish company, invested heavily in training to avoid such cases.</span></p> <h3>A new competitor ahead?</h3> <p><span style="font-weight: 400;">São Paulo&#8217;s mayoral office launched its own app in April to compete with ridesharing apps. Called SPTaxi, the app connects passengers and taxi drivers, offering discounts of up to 40 percent on rides. Moreover, drivers don&#8217;t pay to use the service &#8211; at least, not for now. </span></p> <p><span style="font-weight: 400;">SPTaxi is inspired by a similar app launched in Rio de Janeiro, and it is currently only available on Android. According to former Mayor João Doria, there&#8217;s no expected date for the launch of the app&#8217;s iOS-based version. Another limitation is the impossibility of paying through the app, meaning that rides will need to be paid directly to the driver.</span></p> <p><span style="font-weight: 400;">However, between April 2 and June 18, only 62,300 rides have been made through the app, the equivalent of each registered driver using it only three times across this time span. For now, SPTaxi is no threat to Uber &#8211; but that could change.

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